Pensions - State and Service.

LE

I guess there are a few in here approaching the point where they start to draw their State Pension [OAP]. In that context, I thought I'd pass on a few tips and warn about some wrinkles associated with the various paperwork. I've been through it, and it's Hell

First step is to apply for a State Pension Forecast. For that you have to wade through the cr@p at Publications - DWP

Eventually the happy day arrives, and along with rude birthdays cards from younger friends and relatives, the Department of Work and Pensions starts giving you money. However, this is where the 'fun' starts as well. Because ... the DWP has no mechanism for deducting Income Tax from your State Pension, it can only pay you the gross amount.

So, assuming you have no other employment, your dealings with HM Revenue and Customs and the Tax system are through your Service Pension. And that is where they recover the tax on your State pension ... by adjusting your Tax Code, and thus the amount you receive from your Service pension, to recover the tax due. Clever, innit!

HMRC had long since excused me from submitting an annual Tax Return, as everything was UK based, and taxed at source, and simple. But that does NOT happen when you're an OAP ... because your State Pension gets adjusted [with inflation or Budget changes], and it's not taxed by DWP, so HMRC now needs an annual Self-Assessment tax return so that you can say how much State pension you're receiving. No, there isn't a computer link between DWP and HMRC to do that ... so now I'm back to having to complete an annual return again!!

And, the system only works if it works.

Back in February, I discovered that my Tax authority here needed evidence that my UK pensions [i.e. Service and State] were being taxed in UK. It was at that point, after a couple of letters and phone calls, that I discovered that DWP had failed to inform HMRC that I was now an OAP [yes, I know HMRC knows my date of birth, but I might have deferred my pension etc etc] ... and thus tax was not being recovered from my State pension by the Mickey Mouse system referred to above!

There then followed 6 months of correspondence, including letters and Form P161 [you will need that one] being mislaid at HMRC. The HMRC computer is now happily vomiting new tax codes on a regular basis - I had 2 in May, one in June, one in August and another this month. After all that, I'm now paying an extra £0.80p per month in tax on my Service Pension to cover the tax due on the State Pension.

Awesome system!! God knows what it costs to administer [whether it works or not].

LE

The Tax Office still do not require me to submit a tax return and I have been on State Pension for a number of years now and still living abroad with all my income pensions and taxed at source. I just told them if there was any change< i would inform them and they seemed happy with that. On reflection, I don't mind paying a few thou' tax to the Chancellor in UK so that he can redistribute it to the likes of Sven/3rd World despots/India/Feckless Chavs/Scotland/Quangos ........................

LE

The DWP told me they thought I was still working abroad despite a letter sent 14 years previously that they had 'mislaid'. Luckily, my accountant still had a copy not only of the original letter but also their acknowledgement of receipt!
Mrs Pongo applied for her pension six months before her 60th birthday and it was sorted out four months after her birthday...
Our pension system is total crap - it really gets on my thungas!

LE

Being 'abroad' adds complications, but thy are basically the same cocked-up arrangements as in the UK ... the State Pension can't be taxed by the pension provider [DWP], it has to be done some other way through HMRC.

@ pongo6863 ... yes, same sort of grief with the OH. She's just had a new coding notice [P2] ... exactly the same code as the one she had 9 months previously. That's OK, then ... so why bother? I'm going to have to buy a new filing cabinet for this [faintly] pointless paperwork at this rate

ADC

I retired a number of years ago and my State Pension was due to commence during the Tax Year 2009/10 . I followed the procedure to confirm the level of Pension by asking for a forecast early 2009 .

I wrote to inform HMRC of changes which would occur in the Tax Year 2009/2010 specifically informing my change in income because of State Pension . All done before the Tax Year began , but because I was proactive it degenerated into a shambles . I forget now how may times my Tax Code was changed , for a period almost on a monthly basis and I was dealing with three HMRC Offices , two in England and one in Scotland . I am still paying for their errors .

Edited to add ....been to filing cabinet and my Tax Code was changed eight times .... one of them ... after a number of the changes started taxing me as someone under the age of 65 and thus at a lower personal allowance .

There are those who know .... those who don't know .... but the most annoying , outspoken and dangerous are ....

LE

Being 'abroad' adds complications, but thy are basically the same cocked-up arrangements as in the UK ... the State Pension can't be taxed by the pension provider [DWP], it has to be done some other way through HMRC.

@ pongo6863 ... yes, same sort of grief with the OH. She's just had a new coding notice [P2] ... exactly the same code as the one she had 9 months previously. That's OK, then ... so why bother? I'm going to have to buy a new filing cabinet for this [faintly] pointless paperwork at this rate

LE

But the reason I started this thread is to pre-warn those approaching State retirement that there will be a bludgy great raft of paperwork and confusion ahead.

Blame any Government you choose, but the fact is that DWP and HMRC are both, IMO, staggeringly incompetent/inefficient.
You probably knew that already ... it just gets worse when DWP and HMRC can't even exchange simple information like your rate of State Pension. Or, in my case, DWP even fail to tell HMRC I'm drawing the State Pension. What do they use? A Cardex system?

The only sunshine has been the work by "Paymaster" sending me [and the OH] my Service pension, with clear communications and reliable service. But then they're 'bloody civvies' [bless them] instead of a Government shambles.

Back to filing cabinet again .... Yes I did complete a P161 .... and sent an accompanying letter detailing all my incomes , not enough space on form , and additional info such as Dividends .

Fortunately It was not lost by HMRC but as already said it was the beginning of months of further correspondence and also telephone calls ... receiving the computer generated response something like " We are very busy at the moment ring back .... " ... apparently HMRC call pick up rate is truly appalling ... I know from personal experience .

I keep a record of everything I send these people now .... scan and save .

Edited to add . What really got me annoyed that for me it was a once in a lifetime exercise and the HMRC/ DWP are dealing with it day in day out and they must realise how appalling the system is . Surely it is not beyond the wit of man to design some form of electronic flag / communication to be sent between these two departments with an effectivity date to indicate that you have elected to take your State Pension .

There are those who know .... those who don't know .... but the most annoying , outspoken and dangerous are ....

MIA

I would appreciate it if anyone could tell me where to look for info/advice, or if anyone could give me the low-down regarding State Pensions and British Army pensions if I emigrate to the USA, which considering the state of UK is highly likely...Thanks in advance for any help.

"I do not believe in the God of theology who rewards good and punishes evil." Albert Einstein, and he knew a thing or two.

ADC

If the US agreement is anything like the Australian, you simply fill in a single form, have it stamped by the US tax office and send it to HMRC. They will then stop taxing your pension payments in the UK and the US (IRS?) will tax you instead. Go to the HMRC homepage and type in UK/USA double taxation. Hope that helps.

LE

I don't think the US situation is the same as the Aussie one. Australia has no agreement with UK and I think your pension remains the same but you pay no UK tax whereas the Double taxation agreement means that if living in the US then as stated, pension is incrementally increased and one pays tax at source only. If wrong then someone will no doubt give chapter and verse.

Old-Salt

I would appreciate it if anyone could tell me where to look for info/advice, or if anyone could give me the low-down regarding State Pensions and British Army pensions if I emigrate to the USA, which considering the state of UK is highly likely...Thanks in advance for any help.

Watch your thoughts, for they become words. Watch your words, for they become actions.
Watch your actions, for they become habits. Watch your habits, for they become character.
Watch your character, for it becomes your destiny.

Old-Salt

I don't think the US situation is the same as the Aussie one. Australia has no agreement with UK and I think your pension remains the same but you pay no UK tax whereas the Double taxation agreement means that if living in the US then as stated, pension is incrementally increased and one pays tax at source only. If wrong then someone will no doubt give chapter and verse.

I only pay tax on my Army pension in the UK. I informed both tax authorities and fill in an annual tax return in Australia and UK, they both seem happy that I should only pay tax on the pension income once..

Watch your thoughts, for they become words. Watch your words, for they become actions.
Watch your actions, for they become habits. Watch your habits, for they become character.
Watch your character, for it becomes your destiny.